40
Investor Meetings February/March 2018
Investor Meetings February/March 2018
Contact Information and Safe Harbor Statement
2
Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 [email protected] [email protected]
Safe Harbor Statement Statements made in this presentation that relate to future events or PNM Resources, Inc.’s (“PNMR”), Public Service Company of New Mexico’s (“PNM”), or Texas-New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates. PNMR, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR's, PNM's, and TNMP's business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. For a discussion of risk factors and other important factors affecting forward-looking statements, please see the Company’s Form 10-K and 10-Q filings with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein.
Non-GAAP Financial Measures For an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings and ongoing earnings per diluted share), as well as a reconciliation to GAAP measures, please refer to the Company’s website as follows: http://www.pnmresources.com/investors/results.cfm
http://www.pnmresources.com/investors/results.cfm
Company Overview
PNM Resources Overview
4
Generation Resources and Service Territories
PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and
reliable electricity to customers and above industry average earnings and dividend growth to shareholders
NYSE Ticker: PNM Market Cap: $2.9B
• Energy holding company • Based in Albuquerque, New Mexico
• Located in New Mexico • 523,812 customers • 15,091 miles transmission and
distribution lines • 2,580 MW generation capacity • Top quartile reliability • Affordable rates
• Located in Texas • 249,632 end-users • 9,338 miles transmission and
distribution lines • Top quartile reliability • Affordable rates
PNM Resources Strategic Direction
5
Strategic Financial Goals
Earn authorized return on regulated businesses
Above industry average earnings growth
Maintain solid investment grade credit ratings
Above industry average dividend growth
• Investing aligned to policy directives, evolving customer needs and transforming industry opportunities while ensuring reliability, resulting in cleaner generation fleet
Rate Base Growth
• Realizing earnings potential in business • Earning our allowed returns • Reducing regulatory lag
Earnings Growth
• Sustaining and growing the dividend
• Providing above-average dividend growth
Dividend Growth
Staying Focused and Flexible in a Changing Environment
6
• Integrating technologies and customer insights to new products and services
• Energy Efficiency and Electrification Initiatives
• Robust Economy in Texas
• Coal-free generation
portfolio by 2031; develop new generation portfolio that moves to increased renewable resources
• Invest in storage or backup power resources to maintain system reliability
• Transparency through Sustainability Portal
• TNMP Upcoming General Rate Review, continued TCOS filings
• PNM Integrated Resource Plan • NMPRC Proposed Rulemaking
Workshops Navigating the Regulatory Environment
Responding to Evolving Customer
Needs
Transforming PNM’s Generation Portfolio
$235$257 $276
$284
$111 $94 $76 $74
$20 $53 $96
$129 $141
$157
$146 $35
$51 $81
$186 $170
$170 $170
$19 $17
$17 $17
2018 2019 2020 2021
(In millions)
PNM Core Generation PNM Renewables PNM SJGS Replacement PowerPNM Core T&D PNM Transmission Expansion TNMPDepreciation Corporate/Other
$500 $527
Palo Verde Unit 3
added to rate base
$80
$297
$116
$170
$17
2022
$280
Rate Base Growth: Capital Forecast
7
$681
$504 $500
Targeted Consolidated 2018-2021 Rate Base CAGR(1): 6% - 7% 2018–2022 Total Capital Plan: $2.7B
Targeted PNM 2018-2021 Rate Base CAGR(1): 4.5%-6% from 2018 base reflects potential outcomes from the pending NM Supreme Court general rate case appeal of $0-$150M and additional AMI spending of $12/$59/$24 million in 2018/2019/2020 Targeted TNMP 2018-2021 Rate Base CAGR(1): 10.7% from 2018 base
(1) 2018-2021 CAGR measured from a 2018 base Amounts may not visually add due to rounding.
Chart1
2018
2019
2020
284
Depreciation
235
257
276
Sheet1
20182019202020212022
PNM Generation
PNM T&D
PNM Renewables
TNMP
Other
Total
Depreciation235257276284275
Check
Chart1
280
Depreciation
$280
Sheet1
201720182019202020212022
PNM Generation
PNM T&D
PNM Renewables
TNMP
Other
Total
Depreciation219237263275280280
Check
8
Earnings Growth: Impacts of Tax Reform
Provision Summary Effect on PNM & TNMP Effect on Holding Company
Tax Rate 21% beginning 2018
Reduced tax expense • Results in lower costs and revenues as tax
savings are passed on to customers beginning in 2018
• Creation of excess deferred tax liabilities for items included in rates, which are returned to customers over time Negative cash flow Rate base increases
• Excess deferred tax assets associated with items excluded from rates results in a write-off of $37.5M in 2017
• Reduces tax benefit from holding company losses by ($0.02)
• Excess deferred tax assets associated with items not in rates results in a write-off of $20.0M in 2017
Interest Expense Deductibility
• Deduction limited to 30% of EBITDA
• Exception for regulated utilities
• Interest fully deductible under utility exception
• Small amount of interest allocable to non-utility operations
• No material impact
Tax Depreciation
• 100% immediate expensing of capital costs for five years
• Exception for regulated utilities
• Normal tax depreciation rates under utility exception for clearings beginning in October 2017
• Elimination of bonus depreciation results in rate base increases of $150M at PNM and $30M at TNMP by 2021
• Positive cash flow from tax benefit and no effect on tax expense
Financial Overview: Potential Earnings Power
9
Targeted earnings growth of 6% for 2018 - 2021(1) • PNM growth results from the implementation of retail rates beginning in 2018, the additional
investments to add 50 MW of solar to meet the 20% by 2020 RPS requirement and increased FERC Transmission business to support third party renewable developments
• TNMP growth is driven by incremental investments supporting economic expansion across its service territory
This table is not intended to represent a forward-looking projection of 2020 – 2021 earnings guidance. Refer to Slide 29 for additional details and disclosures.
(1) Calculated from 2018 EPS guidance midpoint of $1.87
Allowed Return / Equity Ratio
2018 Ongoing Earnings Guidance Midpoint
2019 Ongoing Earnings Guidance Midpoint
2020 Earnings Potential
2021 Earnings Potential
Avg Rate Base Return EPS
Avg Rate Base Return EPS
Avg Rate Base EPS
Avg Rate Base EPS
PNM Retail 9.575% / 50% $2.3 B 8.7% $1.27 $2.3 B 9.5% $1.38 $2.4 B $1.42 $2.5 B $1.49
Supreme Court Appeal $0-150 M $0.00-$0.09 $0-150 M $0.00-$0.09 $0-150 M $0.00-$0.09
PNM Renewables 9.575% / 50% $90 M 9.575% $0.05 $110 M 9.575% $0.07 $150 M $0.09 $147 M $0.09
PNM FERC 10% / ~50% $220 M 7.1% $0.11 $285 M 8.0% $0.14 $330 M $0.14-$0.16 $370 M $0.16-$0.18
Items not in Rates $0.01 ($0.02) ($0.04)-($0.02) ($0.04)-($0.02) Total PNM $2.6 B $1.44 $2.7-2.9 B $1.57 $2.9–3.0 B $1.61-$1.74 $3.0-3.1 B $1.70-$1.83
TNMP 10.125% / 45% $905 M 8.5% $0.54 $1,050 M 10.0% $0.65 $1,110 M $0.67 $1,220 M $0.69
Corporate/Other ($0.11) ($0.12) ($0.13)-($0.11) ($0.13)-($0.11)
ATM Program ($0.03)-($0.01) ($0.07)-($0.04)
Total PNM Resources $3.5 B $1.87 $3.7-3.9 B $2.10 $4.0–4.1 B $2.12-$2.29 $4.2-4.3 B $2.19-$2.37
$1.49 $1.64 $1.65
$1.82 $2.04 $1.94 $1.92
2014 2015 2016 2017 2018E 2019E 2020E 2021E
Ongoing EPS
$2.16
$0.74 Dec ‘13
$0.80 Dec ‘14
$0.88 Dec ‘15
$0.97 Dec ‘16
$1.06 Dec ‘17
Indicated Annual Dividends
Dividend Growth
10 (1) Indicative annual rate
• Annual common stock dividend raised by 9.3% to $1.06(1) per share in December 2017
• Expect above industry average dividend growth in the future while targeting the 50% - 60% payout ratio range
• Next dividend review in December 2018
Credit Metrics: Liquidity and Debt Maturity Outlook
11
• Extended TNMP’s $75M revolving credit facility to 2022 in September 2017
• Extended PNM Resources’ $300M and PNM’s $400M revolving credit facilities by one year to 2022
• Extended PNM’s community bank revolving credit facility that expired in January 2018
• At-The-Market equity program will be used to fund 2020 - 2022 expenditures of approximately $150 million
• New debt issuances at utilities 2018 - 2022 of $455 million
$200 $100 $306
$1,060
$172
$293
$250
2018 2019 2020 2021 2022 andBeyond
Long-term Debt Maturities(1) (in millions)
PNM TNMP Corporate
Maintain appropriate credit metrics
Remain a solid
investment grade rated company
Target regulatory
capital structures at PNM and TNMP
(1) Reflects the execution of PNM’s July 2017 note purchase agreement to refinance an aggregate of $450M long-term debt due in 2018 to varying maturity dates beyond 2021. Excludes $50M of debt related to the Westmoreland financing agreements.
Credit Metrics: Rating Agency Perspectives
12
Moody’s Rating/Outlook
S&P Rating/Outlook
PNM Resources Baa3(2) / Positive BBB+(2) / Negative
PNM Baa2(3) / Positive BBB+(3) / Negative
TNMP A1(4) / Stable A(4) / Negative
(1) Issuer/Corporate rating (2) Senior unsecured (3) Senior secured
PNM Resources FFO-to-Debt is maintained well within Moody’s Baa investment grade target range of 13% to 22%
• Moody’s (June 23, 2017): “…its solid financial profile including a ratio of cash flow from operations pre-working capital to
debt in the mid-to-high teens range and a view that capital expenditures will be financed in a balanced manner consistent with PNMR's current financial position.”
“Although the New Mexico regulatory environment remains challenging, PNMR has been able to maintain strong financial metrics that are similar to Baa2 rated peers.”
• S&P (January 16, 2018): “The negative outlook reflects weather cash flows for consolidated PNMR largely stemming from
the effects of the revised U.S. corporate tax code. In addition, the negative outlook takes into account the unresolved prudence issue related to PSNM’s continued investments in its coal fired Four Corners power plant, potentially result in regulatory headwinds that could challenge the company’s ability to consistently manage regulatory risk in New Mexico.”
PNM Overview
PNM: Regulatory Update
14
Filing Action Timing Docket No.
PNM 2018 General Rate Case
Final order modifying revised settlement agreement includes $57.9M increase, before the impacts of tax reform and cost of debt true-up
Phased-in (50% each year) with February 2018 implementation
16-00276-UT
PNM Appeal of 2015 General Rate Case to New Mexico Supreme Court
Oral arguments held October 30, 2017 No statutory timeline S-1-SC-36115
PNM Advanced Metering Infrastructure
Hearings held October 25-26, 2017; pending Recommended Decision Decision expected Q2 2018 15-00312-UT
PNM 2017 Integrated Resource Plan
Order defining scope of proceeding issued January 16, 2018
Hearings scheduled to begin June 4, 2018 17-00174-UT
NMPRC Rulemaking on Utility Ratemaking Policies
Public workshops held September 14, 2017 and November 6, 2017; additional public workshop scheduled for January 23, 2018 was vacated and is pending rescheduling
No statutory timeline 17-00046-UT
PNM: 2017 Integrated Resource Plan
15
Note: By December 31, 2018, PNM must make a separate NMPRC filing to determine whether the San Juan Generating Station should continue to serve customers
Roadmap for meeting customer demand over 20-year horizon, provides foundation for the selection of
future resources
Solicits and incorporates public input
Documents four- year
action plan
Revisited every three years
Submitted July 3, 2017
Filed with NMPRC for review and acceptance
Proposed resources approved separately
Most cost effective portfolio includes securing remaining Palo Verde leases beyond 2023 and 2024 expiration dates
Plans for Coal-Free Generation Portfolio by 2031
PNM: New Mexico Supreme Court Appeal
16
Appealed Item Conclusion Resulting Impact Palo Verde Nuclear Generating Station:
64 MW Unit 2 capacity purchase and Units 1 and 2 lease extensions
Purchase and extension deemed
imprudent
Fair market value disallowed; future responsibility for decommissioning
shifted to shareholders
Leasehold Improvements related to previously leased 64MW capacity
Included in net book value of purchased
64MW capacity
Leasehold improvements rate base disallowed
San Juan Generating Station:
Balanced Draft Air permit rejected
and investment deemed imprudent
Rate base disallowed
• PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016 • PNM filed Statement of Issues on October 26, 2016 detailing items for appeal:
Note: As of December 31, 2017, the asset value of the Palo Verde and balanced draft investments pending appeal with the New Mexico Supreme Court were reduced by $10.0 million pre-tax to reflect a minimum of 22 months disallowed recovery during appeal.
• Oral arguments held October 30, 2017 • No statutory timeline; New Mexico Supreme Court to set calendar for remaining process
PNM: Load and Economic Conditions
17
Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted)
PNM Q4 2017
vs. Q4 2016
2017 vs.
2016 2018E 2019E
PNM Residential & Commercial (1.3%) (0.7%) ~(0.3%) ~(0.3%)
Total PNM Retail Load (1.5%) (0.9%) (0.7%) – 0% (0.5%) – 0.5%
PNM Avg. Customers 0.6% 0.6% ~0.5% per year
(1) U.S. Bureau of Labor Statistics, December 2017
0.9% 1.5%
2014 2015 2016 2017
% C
hang
e
Employment Growth(1) 12-Month Rolling Average
Albuquerque U.S.
PNM: Climate Change Report
18
See more at: http://www.pnmresources.com/about-us/sustainability-portal/climate-change-report.aspx
PNM's goal is to reduce annual CO₂ emissions in 2040 by a total of 87% from 2012 levels
PNM: Pathway to Continued Success
19
• Continue to efficiently manage the business with a customer-centered focus, delivering reliable and affordable energy
• Earn allowed return Minimize regulatory lag through timely rate case filings Synchronize revenues and expenses Use future test year
• Continue to maintain strong investment grade credit metrics
TNMP Overview
TNMP: Regulatory Update
21
Filing Action Timing Docket No.
TNMP TCOS Filed January 30, 2018 Expected to be approved March 2018 47802
TNMP General Rate Case N/A Expected to be filed May 2018 N/A
TNMP: Upcoming General Rate Case
22
• TCOS filings update for transmission investments, but distribution assets and other rate base items have not been updated since last rate case filing (test period ending March 2010)
True-up Transmission and Distribution Recovery
• Operating costs and retail load have not been updated since 2010 rate case
True-up Operating Costs and Load
• Expected to be filed May 2018
Timing
Key Elements
TNMP: Load and Economic Conditions
23
Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted)
TNMP Q4 2017
vs. Q4 2016
2017 vs.
2016 2018E 2019E
TNMP Total Volumetric Load(1) (1.0%) 1.2% 2% – 3% per year
TNMP Demand-Based Load(2) 2.9% 4.0% 2% – 3% 7% – 8%
TNMP Avg. End Users 1.2% 1.2% 1.5% – 2.0% per year
(1) Primarily Residential usage; represents per-kWh billings (2) Commercial and Industrial usage excluding Transmission customers; represents per-kW monthly peak billings (3) U.S. Bureau of Labor Statistics, December 2017
3.1%
1.5%
2014 2015 2016 2017
% C
hang
e
Employment Growth(3) 12-Month Rolling Average
Dallas U.S.
TNMP: Pathway to Continued Success
24
• Continue to efficiently manage the business with an end user-centered focus, delivering reliable and affordable energy
• Continue to earn allowed rate of return through timely execution of transmission cost of service and general rate case filings Additional investments in the business to support strong growth Continue to control costs
• Continue to maintain strong investment grade credit metrics
Financial Overview
Financial Overview: Consolidated Earnings Guidance (Ongoing)
26
$2.04 Consolidated EPS $2.16
PNM $1.54 - $1.61
TNMP $0.63 - $0.66
Corp/Other ($0.13) – ($0.11)
2018 Earnings Guidance
2019 Earnings Guidance
$1.82 Consolidated EPS $1.92
PNM $1.39 - $1.46
TNMP $0.54 - $0.56
Corp/Other ($0.11) – ($0.10)
Financial Overview: Liquidity as of February 20, 2018
27
PNM TNMP Corporate/
Other
PNM Resources
Consolidated
Financing Capacity(1): (In millions)
Revolving credit facilities $440.0 $75.0 $300.0 $815.0
As of 2/20/18:
Short-term debt and LOC balances $79.9 $24.0 $188.8 $292.7
Remaining availability 360.1 51.0 111.2 522.3
Invested cash - - 0.9 0.9
Total Available Liquidity $360.1 $51.0 $112.1 $523.2
(1) Excludes intercompany debt and term loans
Appendix
Potential Earnings Power
29
(1) Authorized ROE of 9.575% has been assumed for 2020 and 2021 Earnings Potential. Average rate base has been reduced by approximately $125M to represent the ($0.06) EPS impact of the lost equity return on the Four Corners SCR investment (debt-only return included in the proposed 2018 general rate case settlement).
(2) Reflects a range of outcomes for the New Mexico Supreme Court appeal of the August 2015 General Rate Case final order. A minimum 22-month appeal timeframe has been used for purposes of writing down the value of the assets under appeal. 2019 average rate base presented includes: PV2 64MW Acquisition Adjustment (~$75M), PV2 Leasehold Improvements (~$25M) and Balanced Draft Technology (~$50M).
(3) PNM Renewables reflect assets collected through the Renewable Rate Rider. (4) PNM FERC earnings potential reflects a return of 7-9% versus the allowed return of 10%, as FERC formula rate methodology uses prior year average rate base and provides for mid-
year rate increases. (5) Consists primarily of decommissioning/reclamation trust income (net of fees and taxes), AFUDC, certain incentive compensation, and the 65MW ownership of San Juan Unit 4. (6) TNMP Earnings Potential includes $0.01 of Competitive Transition Charge recovery in 2019 and $0.01 for Energy Efficiency in 2019 and thereafter. 2018 average rate base has been
held at the year-end 2017 level to reflect the required suspension of TCOS filings during general rate case proceedings. (7) Corporate/Other includes earnings associated with short and intermediate term bank debt, the net impact of Westmoreland financing through NM Capital Utility Corporation, and
a reduction of tax savings due to tax reform. (8) Dilution impact assumes between $50M and $100M equity issuances between 2020 and 2021.
This table is not intended to represent a forward-looking projection of 2020 - 2021 earnings guidance.
Allowed Return / Equity Ratio
2018 Ongoing Earnings Guidance Midpoint
2019 Ongoing Earnings Guidance Midpoint
2020 Earnings Potential
2021 Earnings Potential
Avg Rate Base Return EPS
Avg Rate Base Return EPS
Avg Rate Base EPS
Avg Rate Base EPS
PNM Retail(1) 9.575% / 50% $2.3 B 8.7% $1.27 $2.3 B 9.5% $1.38 $2.4 B $1.42 $2.5 B $1.49
Supreme Court Appeal(2) $0-150 M $0.00-$0.09 $0-150 M $0.00-$0.09 $0-150 M $0.00-$0.09
PNM Renewables(3) 9.575% / 50% $90 M 9.575% $0.05 $110 M 9.575% $0.07 $150 M $0.09 $147 M $0.09
PNM FERC(4) 10% / ~50% $220 M 7.1% $0.11 $285 M 8.0% $0.14 $330 M $0.14-$0.16 $370 M $0.16-$0.18
Items not in Rates(5) $0.01 ($0.02) ($0.04)-($0.02) ($0.04)-($0.02) Total PNM $2.6 B $1.44 $2.7-2.9 B $1.57 $2.9–3.0 B $1.61-$1.74 $3.0-3.1 B $1.70-$1.83
TNMP(6) 10.125% / 45% $905 M 8.5% $0.54 $1,050 M 10.0% $0.65 $1,110 M $0.67 $1,220 M $0.69
Corporate/Other(7) ($0.11) ($0.12) ($0.13)-($0.11) ($0.13)-($0.11)
ATM Program(8) ($0.03)-($0.01) ($0.07)-($0.04)
Total PNM Resources $3.5 B $1.87 $3.7-3.9 B $2.10 $4.0–4.1 B $2.12-$2.29 $4.2-4.3 B $2.19-$2.37
Financial Impact of PNM 2018 General Rate Review
30
(1) New Mexico phased-in a lower state corporate income tax rate from 2014 – 2018. Under the PNM 2018 General Rate Review order, PNM will begin the return of this benefit through customer rates in 2018, over a 3 year period. This also lowers PNM’s income tax expense in 2018, 2019, and 2020.
Financial impact under retail rate phase-in (includes federal and accelerated state tax amortization)
Phase I – February 1,
2018
Phase II – January 1,
2019 (in millions, except EPS)
Revenue increase (net of tax reform give-back) $4.7 $10.3 Accelerated amortization of excess deferred state taxes(1) 6.9 7.5
Financial impact $11.6 $17.8 Income tax (25.4% statutory rate) (2.9) (4.5) Amortization of excess deferred federal income taxes 11.8 12.9 After-tax financial impact $20.5 $26.2 EPS (80M shares outstanding) $0.26 $0.33
$66.76
$75.28 $75.47
$108.61
$111.00
$144.23
$50 $100 $150
City of Seattle - (WA)Public Svc Co of Colorado (CO)
PNM 2018 Phase I (NM)PNM 2019 (NM)
City of Colorado Springs - (CO)El Paso Electric Co (NM)
El Paso Electric Co (TX)NorthWestern Energy LLC - (MT)
PacifiCorp (UT)PacifiCorp (WY)
City of Tacoma - (WA)Avista Corp (ID)
Southern California Edison Co (CA)San Diego Gas & Electric Co (CA)
Montana-Dakota Utilities Co (WY)Avista Corp (WA)
Southwestern Pub Svc Co (NM)Portland General Electric Co (OR)
Tucson Electric Power Co (AZ)PacifiCorp (ID)
Black Hills Power, Inc. d/b/a (WY)Idaho Power Co (ID)
PacifiCorp (OR)Sacramento Muni Util Dist (CA)
Regional Average BillSouthwestern Electric Power Co (TX)
LADWP (CA)US Average Bill
Pacific Gas & Electric Co (CA)PacifiCorp (WA)
City of San Antonio - (TX)Southwestern Electric Power Co (TX)
Nevada Power Co (NV)PacifiCorp (CA)
Entergy Texas Inc. (TX)Arizona Public Service Co (AZ)
Modesto Irrigation District (CA)Salt River Project (AZ)
Imperial Irrigation District (CA)
Comparison of Average Residential Bills(2) Western Region Average Bills by Utility • Forecasted PNM customer bills remain
below current national and regional averages
PNM 2018 General Rate Case Bill Impact
31 (2)PNM rates reflect rates approved in the 2018 General Rate Case. All others reflect U.S. Energy Information Administration's Residential Rate increases through November 2017.
Customer Impact
(1) Bill Impact considers impacts of the 2018 General Rate Case along with Fuel and Purchased Power Cost Adjustment Clause, Renewable Energy Rider and Energy Efficiency Rider charges.
- Current US Avg
- Current Region Avg
- PNM 2019 - PNM 2018 (Phase I)
Bill Impact(1)
Phase I Total Residential 0.68% 1.30% Commercial 0.00% - 0.69% 0.00% - 1.30% Industrial 0.49% - 0.62% 0.92% - 1.18% System Average 0.60% 1.18%
NMPRC Commissioners and Districts
32
District Name Term Ends Party
District 1 Cynthia Hall, Vice Chairman 2020(1) Democrat
District 2 Patrick Lyons 2018 Republican
District 3 Valerie Espinoza 2020 Democrat
District 4 Lynda Lovejoy 2018(1) Democrat
District 5 Sandy Jones, Chairman 2018(1) Democrat
NMPRC Districts and PNM Service Areas
(1) Eligible for re-election to a second four-year term
NMPRC Rulemaking on Utility Ratemaking Policies
33
NMPRC opened an investigation and rulemaking to consider: • Developing a standardized method for determining ROE
• After a baseline ROE is determined, should the ROE be adjusted under an incentive/disincentive mechanism?
• Limitation of utility recovery of attorney and expert witness fees to 50%, except in cases that are fully resolved by contested or uncontested stipulations approved by the Commission
• Allowing intervenors to recover their expenses to the extent the Commission adopts the intervener’s position
• If utilities use proprietary software to support their position, should interveners and Staff be given reasonable access to that software at no cost?
• How should regulatory assets be defined and recovered?
Public workshops held September 14, 2017 and November 6, 2017;
additional workshop(s) pending.
PUCT Commissioners
34
Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of term is determined by the Governor.
Name Term Began Term Ends Party
DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican
Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican
Arthur D’Andrea Nov. 2017 Aug. 2023 Republican
TNMP Rates Compare Favorably in Texas
35
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
AEP Central Centerpoint Oncor TNMP AEP North Sharyland
Residential Total Wires Charge for 1,000 kWh
Source: TDU tariffs for retail delivery service effective September 1, 2017 and PUCT Filings Interchange.
PNM Diversified Generation Portfolio: Capacity
36
Coal 29%
Nuclear 16%
Natural Gas 38%
Renewables 17%
Capacity 2018 Forecasted Generation Mix
(includes renewables related to Facebook data center)
Coal 35%
Nuclear 15%
Natural Gas 35%
Renewables 15%
Capacity 2,801 MW As of 12/31/2017
(1) The potential retirement of the San Juan Generating Station in 2022 would result in a decrease of coal to 7% of the forecasted generation capacity mix in 2023.
(1)
PNM Diversified Generation Portfolio: Energy
37
PNM Diversified Generation Portfolio: Energy
Coal 52%
Nuclear 30%
Natural Gas 9%
Renewables 9%
Energy 12,774 GWh
Based on 12 months ending 12/31/17
Coal 41%
Nuclear 28%
Natural Gas 22%
Renewables 9%
Energy 2018 Forecasted Generation Mix
(includes renewables related to Facebook data center)
(1)
(1) The potential retirement of the San Juan Generating Station in 2022 would result in a decrease of coal to 13% of the forecasted generation energy mix in 2023.
PNM Investment in Renewable Energy
38
Portfolio Standard as a % of Retail Sales
15% 2015
20% 2020
Renewable Rider Collection Methodology
Recovery of renewable investments and REC purchases permitted
through Renewable Energy Rider
New Mexico Renewable Energy Act Streamlined proceedings for approval of utilities’ renewable energy procurement
plans
Provides for recovery of program costs under approved procurement plan
Current Renewable Resources
PNM-Owned Renewable Resources
107 MW of solar capacity(1) Solar battery storage facility
Purchase Power Agreements (PPA) 204 MW PPA with NextEra Energy’s Wind Center
102 MW PPA with NextEra Energy’s Red Mesa 4 MW PPA with Dale Burgett Geothermal Generating Station
Customer-Owned Solar Facilities
82 MW of solar capacity
(1) The 40 MW of PNM-owned solar capacity placed in service in 2015 is recovered through base rates rather than through the Renewable Energy Rider.
PNM San Juan Generating Station Ownership and Participants
39
Unit Total MW PNM MW
PNM Ownership Other Participants/Ownership
1 340 170 50% Tucson Electric 50% (170 MW)
4 507 327 64.5%
City of Farmington 8.5% (43 MW) Los Alamos County 7.2% (36.5 MW) Utah Associated Municipal Power Systems (UAMPS) 7.0% (35.5 MW) PNMR Development Company 12.8% (65 MW)
Total 1,684 497
PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
40
MW Owned vs. Leased
Lease Expiration • Unit 1: January 15, 2015; exercised option to extend leases to 2023 • Unit 2: January 15, 2016; exercised right to purchase 3 leases in 2016 and option to extend one lease to 2024
Yearly Payment Amounts Total PV Unit 1 - $16.5M Total PV Unit 2 - $1.6M
Unit 1
Owned 2.3% 30 MW
Leased 7.9% 104 MW
Total 10.2% 134 MW
Unit 2
Owned 9.5% 124 MW
Leased 0.7% 10 MW
Total 10.2% 134 MW
Slide Number 1Contact Information and Safe Harbor StatementSlide Number 3PNM Resources OverviewPNM Resources Strategic DirectionStaying Focused and Flexible in a Changing EnvironmentRate Base Growth: Capital ForecastEarnings Growth: Impacts of Tax ReformFinancial Overview: Potential Earnings PowerDividend GrowthCredit Metrics: Liquidity and Debt Maturity Outlook Credit Metrics: Rating Agency PerspectivesSlide Number 13PNM: Regulatory UpdatePNM: 2017 Integrated Resource PlanPNM: New Mexico Supreme Court AppealPNM: Load and Economic ConditionsPNM: Climate Change ReportPNM: Pathway to Continued SuccessSlide Number 20TNMP: Regulatory UpdateTNMP: Upcoming General Rate CaseTNMP: Load and Economic ConditionsTNMP: Pathway to Continued SuccessSlide Number 25Financial Overview: Consolidated Earnings Guidance (Ongoing)Financial Overview: Liquidity as of February 20, 2018Slide Number 28Potential Earnings PowerFinancial Impact of PNM 2018 General Rate ReviewPNM 2018 General Rate Case Bill ImpactNMPRC Commissioners and Districts NMPRC Rulemaking on Utility Ratemaking PoliciesPUCT CommissionersTNMP Rates Compare Favorably in TexasPNM Diversified Generation Portfolio: CapacityPNM Diversified Generation Portfolio: EnergyPNM Investment in Renewable EnergyPNM San Juan Generating Station Ownership and ParticipantsPNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
